Living Away From Home Allowances Taxation Treatment Changed

The original reforms were going to remove LAFHA from the FBT regime completely and bring LAFHA into the Income Tax Regime, but a backflip has happened on this change. The end result is that the current regime will continue but with significant changes, which are to "benefit people who are legitimately maintaining a home in Australia away from their actual home for an initial period". The two major differences in LAFHA from 1st October 2012 are:

The employee must maintain a home in Australia for their own use at which they usually reside.

The concessional treatment is limited to a period of 12 months for an employee at a particular work location.

This will result in huge losses to non-resident employees, temporary residents and "457 Visa" employees in that a portion of their employment package cannot be paid to them under the hugely favourable LAFHA concessions. This essentially means that only Australian residents, who maintain their own residence and provide a declaration of this fact to their employer, will still be eligible for LAFHA for a period of 12 months at a particular work location. These changes do not apply to Fly-In/Fly-Out and Drive-In/Drive-Out employees.